ALLIED ENGINEERS AND ELASTOMERS, MUMBAI V. ITO 18(1)(1), MUMBAI

ITA 3456/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3313 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2016
• Court: TRIBUNAL
• Department Lawyers: A RAJHANSDR
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries
• Section: 147

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.3456/MUM/2016 ASSESSMENT YEAR:2009-10 M/S ALLIED ENGINEERS AND ELASTOMERS, 404-A, WAGHWADI, KALBADEVI ROAD, MUMBAI-400002 / VS. INCOME TAX OFFICER-18(1)(1), EARNEST HOUSE, MUMBAI / ASSESSEE / REVENUE P.A. NO . AAHFA7945H $ % & / ASSESSEE BY SHRI RAHUL HAKANI $ % & / REVENUE BY SHRI A. RAJHANS-DR / DATE OF HEARING 30/08/2016 & / DATE OF ORDER: 01/09/2016 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 09/02/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. ITA NO.3456/MUM/2016 ALLIED ENGINEERS AND ELASTOMERS 2 2. GROUNDS NO.1.1 TO 1.3, RAISED BY THE ASSESSEE A RE WITH RESPECT TO UPHOLDING THE VALIDITY OF REOPENING OF ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). DURING HEARING, THE LD. COUN SEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND, THEREFORE, DISM ISSED AS NOT PRESSED. 3. THE ONLY GROUND AGITATED BY THE ASSESSEE IS WIT H RESPECT TO ADDING ADDITIONAL NET PROFIT AT THE RATE OF 12.5% ON THE DISPUTED PURCHASES. THE CRUX OF ARGUMENT ADV ANCED ON BEHALF OF THE ASSESSEE IS THAT ASSESSEE SHOWED T HE GROSS PROFIT AT 9.4% OF THE GROSS PURCHASES AND THE ASSE SSING OFFICER TOOK THE PICK CREDIT, WHEREAS, THE LD. COMM ISSIONER OF INCOME TAX (APPEAL) ADDED 12.5% OF THE GROSS PRO FIT ON THE PURCHASES. THE LD. COUNSEL CONTENDED THAT THE G ROSS PROFIT MARGIN IS 6.69% (AS PER PROFIT & LOSS ACCOU NT) AND 9.40% IN THE CASES OF HAWALA PARTIES AND IDENTICALL Y 6.4% IN NORMAL SUCH CASES. HOWEVER, THE LD. DR, DEFENDED TH E ADDITION MADE BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). 3.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSING OFFICER RECEIVED INFORMATION FROM DGIT(INVESTIGATION) THAT SALES TAX DEPARTMENT HAS EXERCISED DUE DILIGENCE, REVEALING THAT THE ASSESSE E IS INVOLVED IN TAKING ACCOMMODATION ENTRIES OF BOGUS PURCHASES FROM CERTAIN PARTIES. IT WAS ALSO INFORME D THAT THE MAIN PERSON, WHO IS PROVIDING ACCOMMODATION ENTRIES HAS ITA NO.3456/MUM/2016 ALLIED ENGINEERS AND ELASTOMERS 3 ADMITTED BEFORE THE SALES TAX DEPARTMENT THAT THEY ARE NOT CARRYING OUT ACTUAL TRADING ACTIVITIES AND MERELY P ROVIDING BOGUS BILLS/ACCOMMODATION ENTRIES. ON THE BASIS OF THIS INFORMATION, THE CASE OF THE ASSESSEE WAS REOPENED. BEFORE THE LD. ASSESSING OFFICER, FURNISHED SUBMISSIONS AN D RELIED UPON VARIOUS DECISION LIKE INCOME TAX OFFICER VS PA RMANAND 107 TTJ 395 (JODH), JAGDAMBA TRADING COMPANY VS INC OME TAX OFFICER, 16 SOT 6 (JODH), INDIAN & EASTERN NEWS PAPER SOCIETY VS CIT 119 ITR 996 (SC), COCA-COLA EXPORT CORPORATION VS INCOME TAX OFFICER 231 ITR 200 (SC), CIT VS KELVINATOR OF INDIA LTD. 320 ITR 561 (SC), CIT VS S FIL STOCK BROKING LTD. 325 ITR 285 (DEL.) AND GMR HOLDING PVT . LTD. VS DCIT 134 ITD 668 (BANG.). 3.2. IT IS NOTED THAT THE ASSESSEE MADE PURCHASES TO THE TUNE OF RS.40,00,166/- FROM THE ALLEGED HAWALA DEALERS AND THE LD. ASSESSING OFFICER AFTER CONSIDERING THE FACTUAL MATRIX, ADDED BACK THE PICK CREDIT AMOUNTING TO RS.9,35,988/- TO THE INCOME OF THE ASSESSEE. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE SUBMISSION S OF THE ASSESSEE, AND SUMMARY OF SALES GROSS MARGIN AND NET MARGIN IN THE PRECEDING TWO YEARS AND ALSO DURING T HE YEAR UNDER CONSIDERATION WERE PROVIDED, WHICH HAS BEEN SUMMARIZED IN PARA 5.2 (PAGE-6 OF THE IMPUGNED ORDE R), WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE:- ASSESSMENT YEAR 2009-10 2008-09 2007-08 SALES 590.30 727.42 791.62 COST OF GOODS SOLD 550.82 680.36 735.62 GROSS PROFIT 39.48 47.06 56.00 GP(%) 6.69% 6.47% 7.07% ITA NO.3456/MUM/2016 ALLIED ENGINEERS AND ELASTOMERS 4 PROFIT BEFORE PARTNERS APPROPRIATION AND TAXES 15.75 13.58 21.82 PROFIT (%) 2.67% 1.87% 2.76% NET PROFIT AFTER TAX 3.79 2.88 7.80 NP(%) 0.64% 0.40% 0.98% THE ASSESSEE RELIED UPON FOLLOWING JUDICIAL PRONOUNCEMENTS:- I. SHRI HIRALAL CHUNILAL JAIN V/S ITO (ITA NO 4547/MUM/2014 DT 01.01.2016) II. ITO V/S SHRI PARESH ARVIND GANDHI (ITA NO 5706/MUM/2013 DT 13.05,2015 , III. ACIT, V/S SHRI RAMILA PRAVIN SHAH (ITA NO 5246/ MUM/2013 DT 05.03.2015 , IV. ACIT V/S M/S G. V. SONS (ITA NOS 2238/2239/2240/ MUM/20L2 DT 05.12.2014, V. BABULAL C.BORANA V/S ITO 282 ITR 251 (BOM) VI. CIT V/S M.K. BROTHERS 163 ITR 249 (GUJ) VII. C1T V/S NIKUNJ EXIMP ENTERPRISES (P.) LTD. 216 TAXMAN 171 (MAG)(BOM) VIII. ITO V/S EAGLE IMPEX (ITA NO. 5697/MUM./2010) IX. J.H. METALS V/S ITO 77ITD 71 (ASR)(TM) X. G.G. DIAMOND INTERNATIONAL V/S DCIT 104 TT) 809 (MUM) XI. ITO V/S SURANA TRADERS 921TD 212 (MUM) XII. M/S VIJAY PROTIENS LTD. V/S ACIT 58 ITD 428 (ITAT) SANJAY OIL CAKE INDUSTRIES VIS CIT 3161TR 274 (GUJ) XIII. CIT V/S BHOLANATH POLY FAB. PVT LTD. 3551TR 290 XIV. CIT V/S G.A,NANDARAJAN 2281TR 664 (KERALA) ITA NO.3456/MUM/2016 ALLIED ENGINEERS AND ELASTOMERS 5 THE LD. COMMISSIONER OF INCOME TAX (APPEAL), CONSID ERING THE AFORESAID JUDICIAL PRONOUCEMENTS HELD THAT THE ESTIMATION, VARIES WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK CAN BE ADOPTED, THEREFORE, HE EST IMATED THE GROSS PROFIT ON THE ALLEGED BOGUS PURCHASES AT THE RATE OF 12.5%. CONSIDERING THE TOTALITY OF FACTS, THE LD. A SSESSING OFFICER ADOPTED/ESTIMATED THE GROSS PROFIT AT 9.04% WHICH WAS ENHANCED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IN ADDITION TO THE ESTIMATION MADE BY THE ASSESSING OFFICER, WHICH COMES TO PRACTICALLY 22%, IN MY VIEW , IS IMPROPER. CONSIDERING THE CASES CITED BY THE ASSES SEE AND THE MATERIAL FACTS AVAILABLE ON RECORD, IT WILL MEE T THE ENDS OF JUSTICE IF THE GROSS PROFIT ON BOGUS PURCHASES I S ESTIMATED AT 12.5% IN PLACE OF 9.4% ADOPTED BY THE LD. ASSES SING OFFICER. IT IS MADE CLEAR THAT THIS ADOPTION OF GRO SS PROFIT ON THE GROSS PURCHASES WAS AGREED BY THE LD. COUNSEL F OR THE ASSESSEE. THUS, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESEN CE OF LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLU SION OF THE HEARING ON 30/08/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 01/09/2016 F{X~{T? P.S / ! ITA NO.3456/MUM/2016 ALLIED ENGINEERS AND ELASTOMERS 6 & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * / THE CIT, MUMBAI. 4. ) ) * / CIT- , MUMBAI 5. +,- ' , ) '#$ ' / , / DR, ITAT, MUMBAI 6. -0 1$ / GUARD FILE. & / BY ORDER, (+# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI